Double-no-touch options have been all the range for the last five years or so. They are especially popular among Asian central banks, but are also popular with hedge funds as well.
DNTs are essentially a bit that the market will not break a particular range. 1.28/1.32 DNTS helped keep EUR/USD constrained for months this fall and 1.27/1.32s are helping keep EUR/USD from falling off the table as Spain drags its feet on EU aid and Europe deals with the debt sustainability issue in Greece.
As we?ve seen so often, there is a tendency for deep-pocketed players like Asian central banks to try and protect their option plays. For instance there was talk today of CBs buying ahead of 1.2700 barriers. Should a rally unfold, that same central bank will likely look to offload those euros bought ahead of 1.2700 on rallies to 1.2850/1.2900.
The result? The perpetuation of frustrating, low-volume range trade.
Source: http://www.forexlive.com/blog/2012/11/08/mr-markets-lovehate-relationships-with-dnts/
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